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Bank Supervision, Regulation, and Instability During the Great Depression

Published online by Cambridge University Press:  15 March 2005

KRIS JAMES MITCHENER
KRIS JAMES MITCHENER
Affiliation:
Assistant Professor, Department of Economics, Santa Clara University, 500 El Camino Real, Santa Clara, CA 95053-0385; and Faculty Research Fellow, NBER. E-mail: kmitchener@scu.edu.
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Abstract

Even after controlling for local economic conditions, differences in supervision and regulation help explain the large variation in state bank suspension rates across U.S. counties during the Great Depression. More stringent capital requirements lowered suspension rates whereas laws prohibiting branch banking and imposing high reserve requirements raised them. States whose bank supervisors could liquidate banks minimized contagion and credit-channel dislocations and experienced lower suspension rates. Those that gave their supervisors sole authority to issue bank charters and granted their supervisors long terms strengthened the incentives for bank lobbyists to influence supervisory decisions and consequently experienced higher rates of suspension.

Type
ARTICLES
Information
The Journal of Economic History , Volume 65 , Issue 1 , March 2005 , pp. 152 - 185
Copyright
© 2005 The Economic History Association

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